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A growing number of high-profile brand owners are taking
enforcement action against “metaverse” infringers and
on February 8, 2023, a New York Federal court rendered a highly
anticipated decision in
Hermes International v. Rothschild, S.D.N.Y., No.
1:22-cv-00384- the first case to consider non-fungible
tokens (“NFTs”) and trademark
infringement in the virtual word. The French luxury brand
Hermès International and Hermès of Paris, Inc.
(“Hermès”) was awarded $133,000 USD in damages,
$110,000 for trademark infringement and dilution, and $23,000 for
cybersquatting. See
Part I of our Metaverse Series for an in-depth discussion
of trademark and copyright protection of virtual goods and
services.
In January 2022, Hermès International and Hermès
of Paris, Inc. (“Hermès”) the French luxury
brand brought an action for trademark infringement and trademark
dilution against Mason Rothschild, a California-based digital
artist that created and sold the “MetaBirkin”, a
collection of 100 NFT’s depicting faux-fur iterations of the
iconic Birkin bag. Physical Birkin bags can easily retail for six
figures. The “MetaBirkin” NFTs were sold on digital
marketplaces for between USD$13,000 – $65,000. In its claim,
Hermès asserted that Rothchild’s
“MetaBirkins” constitute trademark infringement, unfair
competition, and dilution with respect to unauthorized use of
Hermès federally registered trademarks, including the
“globally recognized” BIRKIN word mark and trade
dress.
Rothchild argued that the MetaBirkin NFTs were works of artistic
expressions—similar to Andy Warhol’s depiction of
Campbell’s soup can—and therefore protected by the
First Amendment. Rothchild applied the Rogers
test (established in Rogers v Grimaldi, 875 F.2d 994 (2d
Cir. 1989)) wherein use of a trademark does not constitute
infringement if it is an artistic expression and does not
explicitly mislead consumers. He further claimed that the digital
works were protected under the doctrine of fair use.
Hermès argued that the Rogers did not
apply as Rothschild’s use of “MetaBirkin”
explicitly misled consumers to assume the NFT’s were
associated with Hermès and undermined consumer
identification of Hermès as the unique source of goods sold
under the BIRKIN mark. Additionally, Hermès maintained that
the Rothchild’s use of MetaBirkin in connection with the
NFT’s was commercial in nature, had been used in association
with a commercial product line, highlighting Rothchild’s use
of “MetaBirkin” on his website and social media
platforms.
The case is seen as a potentially significant early precedent
for the NFT world, which is built around decentralized,
permissionless platforms that let anyone sell digital items. An NFT
is a blockchain token that can serve as a deed of ownership for
various items, including digital goods like artwork and
collectibles plus physical products as well. In May 2022, the court
denied Rothchild’s motion to dismiss the lawsuit despite
finding that Rogers applied, in part, stating
that “using NFTs to authenticate an image and allow for
tradeable subsequent resale and transfer does not make the image a
commodity without First Amendment protection any more than selling
numbered copies of physical paintings would make [them] commodities
for the purposes of Rogers”.1 Judge Rakoff
ultimately, found that Hermès’ amended complaint
contained sufficient factual allegations to support the claim that
Rothschild’s use of the BIRKIN trademark was not artistically
relevant was explicitly misleading (the two prongs of
the Rogers test).
On February 7, 2023 the court instructed the jury on the
application of Rogers and First Amendment
protections stating that “the parties disagree about the
degree to which the MetaBirkins NFTs are
works of artistic expression,” but it is
“undisputed … that the MetaBirkins NFTs, including the
associated images, are in at least some respects
works of artistic expression”.2
This is a particularly notable case, as it is the first the
decision to examine the scope and application of trademark
protection of digital assets (specifically, NFTs and blockchain
technologies) in a virtual environment. This decision in favour of
Hermès suggests a willingness to bolster brand owners’
right to control the use and enforce infringement of their
trademarks in the metaverse. Further, this case suggests that while
selling digital art could constitute “artistic
expression” entitled to First Amendment protection
under Rogers, real world, established trademark
principles of confusion, goodwill and dilution will be applied to
virtual disputes. Other ongoing NFT trademark disputes to watch
include Nike v. StockX, and Yuga Labs v.
Ryder Ripps. As intellectual property disputes continue to
shape the application of current intellectual property tenets to
blockchain based, digital assets more and more brands are filing
Web3, metaverse focused trademark applications, including
Hermès.
Footnotes
1 Hermes Int’l v. Rothschild, 22-CV-384
(JSR) (S.D.N.Y. May. 18, 2022) at para 11.
2
https://www.courthousenews.com/wp-content/uploads/2023/02/MetaBirkins-NFT-jury-instructions.pdf
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